Booksellers: partner or perish?

On the heels of Amazon.com's move to boost commission to its popular partners, BarnesandNoble.com announces partnerships with more than 40 companies.

9 September 19978:50 pm BST

BarnesandNoble.com, the online division of bookstore giant Barnes & Noble (BKS), announced partnerships with more than 40 companies today.

Under the arrangement, which includes such high-traffic Web names as CNN Interactive, ESPN SportsZone, and USA Today Online, BarnesandNoble.com will market its books on partner sites and pay affiliates a commission for each sale they bring in. Each site will be able to create a virtual bookstore that is relevant to the content it carries--allowing, for instance, ESPN to feature books about sports or CondeNet to sell travel-related titles.

The announcement comes on the heels of an announcement yesterday by Amazon.com(AMZN) to boost commissions to its most popular partners, providing additional incentives for them to link to the BarnesandNoble.com competitor.

Barnes & Noble characterized its partnership as a key part of developing its online component, which was launched last March.

"We think this is going to be an important next step in the incremental development of our business," said company chief executive Steve Riggio in a telephone conference.

Indeed, analysts following online sales of books say such partnerships will be a crucial ingredient for companies hoping to tap the emerging market, which is expected to mushroom in the next five years. As more companies try to get a piece of the action, it will become increasingly important to lure new buyers from other Web sites, they add.

"The affiliate network that Barnes & Noble is launching will enable the company to get a great deal more traffic and also enable their partners to add more value to particular offerings," said Christopher Vroom, an analyst with BT Alex. Brown. "I feel pretty good about where the company is headed and how they are leveraging their existing infrastructure to develop their Web presence."

Under the deal, affiliates earn a commission for every sale they bring into BarnesandNoble.com. In addition, the bookseller will provide advertising over its affiliate network, giving its members the opportunity to pull in a share of the revenues.

While online sales of books last year generated only $27 million, that number is expected to explode in just the next few years, according to Nicole Vanderbilt, senior analyst at Jupiter Communications. By 2002, she said, revenues from online book sales will reach $2.2 billion.

Right now, the major contenders for this market include BarnesandNoble.com, Amazon.com, and Book Stacks Unlimited. Later this year, the Borders Group(BGP) is expected to unveil its own Internet presence. A number of other companies also are trying to muscle their way into the market, further driving up competition.

The companies that are successful will need to have expertise in putting their titles online with an interface that is easy to use, an effective way of distributing books to customers, and alliances to attract customers, Vanderbilt and Vroom agreed.

The going discount from online sellers is 30 percent off hardcover titles and 20 percent off paperbacks. Some bookstores--including Amazon.com, Book Stacks Unlimited, and other online vendors--discount best-selling titles by 40 percent. With prices for online books so drastically reduced, there is little room for further discounts.

"It's a matter of who gets there first in addition to who has the best model," said Vanderbilt. She added that while Amazon.com's move yesterday to boost commissions will attract affiliates, BarnesandNoble.com's announcement today is likely to be more effective.

Why? That's because Amazon.com partners only receive commissions for promoting specific books, such as one featured in a site's book review. Furthermore, Amazon.com's incentive applies only to the so-called top 500 PC Meter sites--the 500 Web addresses judged by Media Metrix to bring in the highest number of visitors.

"I think Barnes & Noble is creating a more integrated partnership, and I think that will lend itself to a more pleasurable experience for the partner," added Vanderbilt. The company has also created an "extranet" for its affiliates to calculate commission earnings and access other information. Amazon.com apprises its members of such information via email.